Crown Resorts Hit With Lawsuit Over Breached Financial Regulations

Summary

• Crown Resorts hit with lawsuit from AUSTRAC
• Lawsuit filed as Crown Resorts breached financial regulations
• Will the lawsuit have an impact on Crown-Blackstone acquisition?

Australia’s financial intelligence agency, Australian Transaction Reports and Analysis Centre (Austrac) filed a lawsuit in federal court against Crown Resorts on 1 March 2022 for ‘innumerable’ breaches of anti-money laundering (AML) and counter-terrorism finance (CTF) laws.

In its legal filing, Austrac said that Crown’s failure to address its shortcomings and do ‘due diligence‘ on high-risk customers accounted for 547 breaches of AML/CTF laws.

Crown’s ‘Due Diligence’ Failure Exposed Australia to Crime

Austrac filed the lawsuit after an investigation showed that James Packer-led Crown had failed to implement an AML/CTF program to mitigate the misappropriation of its casinos. Austrac said that Crown’s failure to perform due diligence on its customers left it and Australia’s financial system vulnerable to criminal exploitation. The high-risk group of customers included money laundering suspects linked to organised crime, overseas junket operators and players, and government officials from abroad.

The regulator cited that over 60 customers engaged in suspicious cash transactions of $70 billion and stowed away massive amounts of cash in plastic bags, shoeboxes along with dealing in counterfeit cash. Overseas junkets from Asia were a lucrative part of Crown’s business. However, given the allegations, the group denies accepting them.

Austrac also alleged that 447 others were involved in ML/TF transactions, found by Crown’s external consultants. The group might incur a penalty of more than $1.2 billion with each proven breach of law. Previously, Australian bank Westpac had attracted a $1.3 billion fine to settle allegations by Austrac that it had breached AML/CTF laws and had allowed 12 customers to transfer money to the Philippines to fund child exploitation.

According to its chief executive Nicole Rose, since Crown is working to address its failings, there is scope for improvement. Austrac is working with the group to develop a remediation plan that would aid Crown in complying with laws and managing financial crime risk in a better way. Rose asserted that it was a result of a change in organisational culture.

Austrac’s Filing Might Jeopardise Crown-Blackstone Deal

Austrac’s legal filing might jeopardise Crown’s attempts to pull off the $8.9 billion acquisition bid by American equity behemoth Blackstone. Crown had replaced the majority of its board and management in 2021 as it faced a bevy of inquiries in New South Wales (NSW) and Victoria that criticised James Packer’s control over the group. Packer still holds 37% of Crown’s shares.

While Crown has said that it was reviewing the lawsuit, Blackstone did not comment on the development. Crown’s shares registered a decrease from $13.10 to $12.23, 1.2% lesser than what Blackstone had offered it.